American Express rewarding loyal users with frequent-flier miles New marketing device is designed to compete with airline affinity cards.


If you charge as much as $5,000 a year on an American Express card, you could be targeted for a new marketing device the company is calling "the next generation of frequent-traveler reward programs."

Under the "Membership Miles" program, for each dollar you charge on an American Express card, you get one "mile" of credit. The mileage then can be applied to a frequent-flier account, at the rate of $1 for one mile, with any one of seven airlines: Continental, Delta, MGM Grand Air, Midway, Northwest, Pan Am and Southwest.

The new American Express plan will go after the same travelers who have popularized bank-issued MasterCard and Visa "affinity" credit cards affiliated with a particular airline's frequent-flier program. Purchases on those cards also earn one mile of credit for every dollar charged.

One drawback to the new program: You are required to spend at least $5,000 in one year before you are "vested." That means if you charge $4,999 on your American Express card in one year, you get no mileage credit for that year. MasterCard and Visa affinity cards affiliated with frequent-flier programs usually have no minimum dollar threshold before a participant gets credit.

The two biggest issuers of such cards, American Airlines through Citibank and United Airlines through First Chicago Bank, are conspicuously absent from the American Express program because they want to continue to support the use of their own affinity-card programs.

Although American Express has lost market share to Visa and MasterCard in recent years, observers of the credit-card business praised the Membership Miles program as another good marketing tool for the higher-income end of the business.

"It will be very successful for American Express and shows that they have really done their homework," predicted David Robertson, president of the Nilson Report, a credit-card-industry newsletter in Los Angeles. "It shows once again how well they understand the upscale market."

Membership Miles is being touted as another American Express card-member privilege, aimed at the most frequent business traveler, and comes as a result of extensive market research with customers, officials said.

The customers said they wanted a program that would reward them for being loyal users of the American Express card but that would offer flexibility, too, in the way awards could be used, said Phillip J. Reise, executive vice president and general manager of the charge-card group.

"We've spent a lot of time talking to card members in general and frequent business travelers in particular," Reise said. "They are interested in rewards for usage and rewards for frequent-flier miles. They're also interested in flexibility in awards."

Under Membership Miles, the rewards aren't just for airline travel. You could save your miles and use them to buy entire vacation packages, or what Amex is calling "once-in-a-lifetime experiences," such as a tennis lesson from professional star Ivan Lendl.

If a member has more than one American Express card -- a common occurrence, the company says -- all the spending can be combined into one Membership Miles account. The American Express program will be free the first year and cost $25 annually thereafter.

Because of the $5,000 minimum spending level, American Express isn't mass-marketing Membership Miles. If Amex wants you, you'll get a flier in the mail, although any cardholder who asks to join will be admitted.

One of the great attractions of the new scheme is that you also can continue to earn miles in the usual way with each of the airlines' frequent-flier plans, even if all your American Express charges are for airplane tickets.

In fact, you could actually earn mileage on two airlines at the same time if, for example, you took a United Airlines flight and charged it to your American Express card. You would earn United MileagePlus miles for the actual trip, then apply the Membership Miles to your frequent-flier account with Delta.

The ability to effectively earn mileage twice also has been one of the big attractions of the MasterCard and Visa affinity programs, which all the major airlines offer and which have been hugely successful, at least for the issuing banks.

"The competition is the affinity cards," Reise acknowledged.

Spokesmen for MasterCard and Visa said they weren't especially concerned about the new competition because of the success of their affinity programs.

"They're playing catch-up to Visa on this," Visa spokesman David Brancoli said.

Brancoli and MasterCard spokesman Steve Apesos said their customers told them in surveys that what they wanted most from a card was widespread acceptance by merchants. Visa and MasterCard are accepted more widely than American Express.

Apesos added that customers also were seeking "value-added" benefits from their cards and that frequent-flier affinity programs clearly fit that category.

"They're one of the more successful programs because built into the affinity credit cards is a value-added aspect," he said. "People want something back when they're using their cards."

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